Build a little better. Know your numbers

The Superintendent Who Coded Cleaning to Lump Sum Concrete and Lost $40K in Fee

There is a superintendent managing a project six months from completion. The budget is healthy. Plenty of internal contingency. Fee position tracking at 98% of original target. And someone gives him advice: kick all the cleaning costs out of the main project budget and code them into the concrete self-perform budget. Save money on the overall project. Look good to the owner. And the superintendent thinks this sounds smart. So he starts coding cleanup labor, COVID protocols, handrail wiped owns, and lunchroom maintenance into the lump sum concrete cost codes. Saves $40,000 on the main project budget. Looks like a hero. Until the project accountant reviews the coding and realizes what happened. The concrete scope was lump sum. Meaning any savings in that self-perform work goes directly to contractor fee. But the main project budget had no shared savings clause. Meaning any savings in the overall budget goes back to the owner. So by coding $40,000 of cleaning into lump sum concrete instead of the main project budget where money existed, the superintendent just gave away $40,000 in fee. Money that should have stayed in the contractor’s pocket. Because he did not understand the difference between lump sum self-perform budgets and overall project budgets. He did not know where his revenue streams came from. He did not know that equipment rental gains, labor gains, insurance and bond gains, and lump sum self-perform savings are the only ways to increase fee on fixed-fee GMP projects. And because he did not know the numbers, he made a $40,000 strategic mistake while thinking he was being smart. This is what happens when superintendents divorce themselves from finances. When they say: that is the PM’s job, I just build stuff in the field. When they do not know their job cost report, their contingency position, their exposures, their fee projection, or where to code costs strategically. Because you cannot manage what you cannot measure. And you cannot win the game if you do not know the scoreboard.

Here is what happens when superintendents do not know the numbers. A project manager runs a project with healthy financials. Fee position at 100% plus. Internal contingency more than adequate. Risk register showing exposures well within available contingency. And the superintendent makes decisions without reviewing financials. He returns the tower crane two months early because “we need to get it out of here and save money.” But the contractor owns the tower crane. And the rental income from that crane is coming out of the project budget as an equipment charge. Which means the contractor gets equipment gains on that rental. The difference between what the owners pays for the crane and what it actually costs to operate. And by returning it early while work still needed it, the superintendent eliminated two months of equipment gains. Roughly $30,000 in fee. Plus he created flow problems. Trades had to hand-carry materials instead of hoisting them. Sequences slowed down. Labor hours increased. And the project finished one month late. All because the superintendent thought he was saving money by returning equipment early. Without understanding that keeping the crane generated revenue through equipment gains. And that equipment gains only happen when the equipment is on site and being charged to the project. This is strategic ignorance. Making decisions without knowing how they affect fee position. Because the superintendent never asked: where do we make money on this project? What are our revenue streams? How does this decision impact our fee?

The real pain is trade partners who never know their financial position until the end of the job. A subcontractor works six months on a project. And when the superintendent asks: how are you doing financially? The foreman says: we will not know until the end of the job. No tracking. No projections. No understanding of whether they are making money or losing money. Just building and hoping. And when the job finishes, they discover they lost $80,000. Because they did not track costs. Did not project labor hours against budget. Did not identify problems early when they could be corrected. Just waited until the end and hoped for the best. This is management by prayer instead of management by measurement. And it destroys companies. Because by the time you know you are losing money, it is too late to fix it. The labor is spent. The materials are purchased. The damage is done. But if you track weekly. Review job cost reports monthly. Project contingency use and fee position quarterly. You see problems when they are small. When a concrete crew is burning hours faster than budget. When material costs are trending over estimate. When exposures are accumulating faster than contingency can cover. And you adjust. Before small problems become catastrophic losses. Because you cannot manage what you cannot measure. And if you are not measuring, you are just guessing.

The failure pattern is predictable and expensive. A superintendent runs a project without reviewing the PSR (project status report). Does not know internal contingency versus contractor contingency. Does not understand how fee is calculated or what labor gains and equipment gains mean. And makes coding decisions blindly. Codes COVID protocol costs to self-perform when they belong in the general conditions budget. Shortcuts final cleaning contracts because “we can handle it cheaper in-house” without realizing in-house labor generates gains that subcontracted labor does not. Eliminates a second field engineer to “run lean” without understanding that field engineer salaries generate labor gains that increase fee. And by the end of the project, these small strategic mistakes add up to $100,000 in lost fee. Not because the work was done poorly. But because the financial strategy was ignorant. The superintendent did not know where to code costs to maximize fee. Did not understand which revenue streams were available. Did not know that on fixed-fee GMP contracts without shared savings clauses, the only ways to increase fee are: lump sum self-perform savings, equipment rental gains, staff labor gains, craft labor gains, and insurance and bond gains. Those five revenue streams. Nothing else. So every decision should be evaluated against those five streams. Does this decision increase or decrease our fee? And if you do not know the numbers, you cannot ask that question. If your project needs superintendent coaching, project support, or leadership development, Elevate Construction can help your field teams stabilize, schedule, and flow.

What Numbers Superintendents Must Know

Every superintendent must be able to rattle off these numbers without looking at reports: current contingency remaining, projected contingency use, number and value of contracts left to buy out, current fee position as a percentage of original target, total value of exposures in the risk register, and overall budget health. If you cannot recite these numbers from memory, you are not managing the project financially. You are just building and hoping. The job cost report shows all accounting tallied. Every cost code. Every contract. Every labor hour. Every material purchase. This is the foundation. Without understanding the job cost report, you cannot understand anything else. Contingency comes in two forms: contractor contingency (visible to owner) and internal contingency (hidden budget buffer). You must know both. How much contractor contingency remains? How much is projected to be used based on current exposures? Is internal contingency adequate to cover risk register items? These questions are non-negotiable.

Exposures are risks that might require money. A trade partner might claim delay damages. An owner might reject work requiring rework. A design error might require additional scope. The risk and opportunity register should estimate possible expenditures for each exposure, multiply by likelihood percentage, and project required contingency. If projected contingency use exceeds available contingency, you are heading into fee erosion. Catch this early. Before it becomes catastrophic. Fee projection must include everything: stipulated fee, staff labor gains (difference between what you bill the owner and what you pay employees), craft labor gains (same for field workers), equipment rental gains (difference between rental charges to owner and actual equipment costs), and insurance and bond gains (difference between charges and actual premiums). Add these together. Compare to original fee target. Are you at 90%? 98%? 105%? This number tells you whether you are winning or losing financially.

Signs You Do Not Know the Numbers

Watch for these patterns that signal you are managing blindly instead of strategically:

• You make decisions about equipment, staffing, or subcontracts without first checking fee position and asking how this decision impacts revenue streams like labor gains or equipment gains
• You code costs to whatever bucket seems convenient without understanding whether those costs belong in project budget or self-perform codes based on lump sum versus GMP structure
• Someone asks your current fee position or contingency remaining and you say “I need to check with the PM” instead of rattling numbers off immediately from memory
• You think finances are the PM’s job and your job is just building in the field creating strategic blindness that costs tens of thousands in lost fee through poor coding decisions
• Trade partners on your project say “we will not know how we did financially until the end” instead of tracking weekly against budget and projecting monthly
• You shortchange final cleaning or eliminate needed staff to “save money” without understanding that proper contracts and adequate staffing generate gains that increase rather than decrease fee

These are not signs of field focus. These are signs of strategic ignorance. Supers who do not know numbers make expensive mistakes while thinking they are being smart. Like coding cleaning to lump sum concrete when it belongs in project budget. Or returning tower cranes early to save money when keeping them generates equipment gains. Every decision has financial consequences. And if you do not know the numbers, you cannot evaluate those consequences.

Strategic Coding Decisions That Maximize Fee

Understanding where to code costs is the difference between making fee and losing fee. Start by knowing: is your self-perform work lump sum or part of the overall GMP budget? If lump sum, any savings go to contractor fee. If part of GMP without shared savings clause, any savings go back to owner. So strategic coding depends on this structure. If self-perform is lump sum and project budget is healthy, code questionable items (COVID protocols, general cleaning, and handrail wipedowns) to the project budget where money exists. Not to lump sum self-perform. Because charging lump sum self-perform reduces the savings you pocket. While charging project budget uses owner’s money for owner’s benefit without reducing your fee. This is not dishonest. This is proper accounting. Coding costs to the correct budget category based on what the work actually is.

But if self-perform is lump sum and project budget is over budget with limited contingency, you might code some general items to self-perform to make the overall project budget audit properly. Eating some savings to protect the project. Different circumstances require different strategies. And you cannot deploy the right strategy without knowing current financial position. Same logic applies to equipment decisions. If you own equipment and rent it to the project, that rental income generates equipment gains. Keep that equipment as long as legitimately needed. Every month it stays on site is another month of gains. But if you do not own the equipment and are paying external rental fees from project budget, return it immediately when no longer needed. Opposite strategies depending on ownership structure. And you cannot know which strategy without knowing the numbers.

The Five Revenue Streams on Fixed-Fee GMP Projects

On most fixed-fee GMP contracts without shared savings clauses, there are exactly five ways to increase fee beyond the stipulated amount: lump sum self-perform savings, equipment rental gains, staff labor gains, craft labor gains, and insurance and bond gains. That is it. Understanding these five streams changes how you make every decision. Need another field engineer but worried about cost? If project budget is healthy, hire them. Because staff labor gains (difference between billable rate and actual salary) generate fee. The field engineer might cost you $80K in salary but bill at $95K. That $15K difference is fee. So hiring needed staff when budget allows actually increases rather than decreases fee. Same with craft labor. Self-performing work with your own crews generates craft labor gains. If project budget is healthy and you have capacity, take on additional self-perform work strategically. Especially work with higher margins. Because those labor gains flow directly to fee.

Equipment rental gains work the same way. If you own a tower crane and rent it to the project at market rates, the difference between rental income and actual operating cost is fee. So keeping that crane on site as long as legitimately needed maximizes gains. While returning it early to “save money” actually costs money by eliminating the gain stream. Insurance and bond gains come from the difference between what you charge the owner for insurance and bonds versus what you actually pay in premiums. Usually this is built into the contract and does not require active management. But it contributes to overall fee and must be included in projections. When you know these five streams, you can ask the critical question for every decision: does this increase or decrease our fee? Hire another field engineer? Increases fee through labor gains if budget allows. Return tower crane early? Decreases fee by eliminating equipment gains. Code cleaning to lump sum self-perform? Decreases fee by reducing lump sum savings. Strategic decisions become obvious once you understand revenue streams.

How to Learn the Numbers Without Knowing Accounting

You do not need to be an accountant to know the numbers. You need to ask the right questions and understand the right reports. Start with the job cost report. Sit with your PM or project accountant and say: speak to me as you would a small child or a golden retriever. This is from the movie Margin Call. Dumb this down for me. Walk through the job cost report line by line. What does each section mean? Where are self-perform cost codes versus subcontract codes? How do I read budget versus actual versus committed versus projected? What is the contingency line? Where are labor burden and insurance and bonds calculated? Ask until you understand every section. Then move to the PSR or MSR or whatever financial reporting form your company uses. What is overall contingency? What is projected contingency use versus remaining? What is internal contingency for the budget? Where are all the buckets? How is fee calculated? Does it include staff labor gains, craft labor gains, insurance and bond gains? Ask question after question until you understand all reporting and all forms and exactly how they are used.

Then apply this knowledge weekly. Review job cost report weekly. Check contingency position monthly. Update risk register monthly with current exposures and projected costs. Project fee position quarterly including all five revenue streams. And always know where you are. Because you cannot course-correct if you do not know you are off course. And you cannot know you are off course if you are not measuring. The good news is: once you learn the numbers, they become fun. Like a game. You see the scoreboard. You know what moves increase your score. And you start thinking strategically. How can I improve our fee position? By coding properly. By keeping equipment that generates gains. By hiring staff when budget allows. By self-performing work with higher margins. By properly bidding final cleaning and closeout contracts. Small strategic decisions that add up to large fee improvements. This is what separates great superintendents from mediocre ones. Not just building skills. But strategic financial thinking that maximizes fee while delivering remarkable projects.

Why Small Improvements Create Massive Results

Tony Robbins teaches a business growth formula. There are only three ways to grow revenue: increase number of clients, increase average transaction value, or increase how often clients repurchase. When you tell someone you can grow their business 143%, they think you are crazy. But when you break it down: increase clients by 30%, increase transaction value by 25%, increase repurchase frequency by 50%. Each of these individually seems reasonable. But multiply them together and you get 143% growth. Same principle applies to construction fee optimization. You do not need one massive decision that doubles fee. You need small strategic improvements across multiple areas. Code cleaning properly instead of to lump sum: saves $40K in fee. Keep tower crane two months longer: adds $30K in equipment gains. Hire second field engineer: adds $15K in labor gains. Properly bid final cleaning: saves $20K in re-cleaning and punch list labor. Self-perform additional framing scope: adds $25K in craft labor gains. Each decision seems small. But add them together: $130K in fee improvement. From 0.98 of original fee target to 1.11. All through small strategic decisions made because you know the numbers.

This is optimization. Not heroics. Not working harder. Just understanding the scoreboard and making strategic moves that increase your score. And you cannot do this without knowing the numbers. Without understanding your five revenue streams. Without tracking job cost reports and contingency and exposures and fee projections. Because financial strategy without measurement is just guessing. And guessing costs money.

The Challenge

Walk into your project office tomorrow and ask yourself: do I know the numbers? Can I rattle off current contingency remaining, projected contingency use, number and value of contracts left to buy out, current fee position including all five revenue streams, and total value of exposures? If you cannot answer these questions immediately from memory, you have a problem. Because you cannot manage what you cannot measure. And if you are not measuring, you are not managing. You are just building and hoping. So sit with your PM or project accountant this week. Pull out the job cost report. Pull out the PSR or MSR or financial reporting forms. And say: speak to me as you would a small child or a golden retriever. Walk me through every line until I understand every number. Then commit to reviewing these reports weekly. Knowing the numbers at all times. Making strategic decisions based on financial position instead of gut feeling.

As Tony Robbins teaches: small improvements in multiple areas create massive results. An 8% average improvement across seven key areas generates 134% overall growth. Same principle applies to fee optimization. Code cleaning properly: small improvement. Keep equipment that generates gains: small improvement. Hire staff when budget allows: small improvement. Self-perform strategically: small improvement. But add them together and you transform fee position from 0.98 to 1.11. From barely making target to exceeding it significantly. This is what knowing the numbers enables. Strategic thinking that maximizes fee while delivering remarkable projects. So learn the numbers. Love the numbers. Track the numbers relentlessly. Because you cannot win the game unless you know the scoreboard. And the scoreboard is your job cost report, your contingency position, your exposures, and your fee projection. Know them. Own them. Use them to make strategic decisions that maximize fee while protecting workers and delighting owners. On we go.

Frequently Asked Questions

What five revenue streams increase fee on fixed-fee GMP projects?

Lump sum self-perform savings, equipment rental gains, staff labor gains (difference between billable rate and salary), craft labor gains (self-perform labor margins), and insurance and bond gains. These are the only ways to increase fee beyond stipulated amount when no shared savings clause exists.

How do you decide whether to code costs to project budget or self-perform codes?

If self-perform is lump sum, coding costs there reduces your fee savings. If project budget is healthy, code items like general cleaning to project budget where money exists. If project is over budget, you might code some items to lump sum self-perform to make overall budget audit properly. Strategy depends on financial position.

Why should you keep equipment longer if you own it and rent it to the project?

Because rental income generates equipment gains, the difference between what the owners pays in rental charges and what it actually costs to operate. Every month the equipment stays on site is another month of gains flowing directly to fee as long as the equipment is legitimately needed.

What reports must superintendents review to know the numbers?

Job cost report (all accounting tallied), contingency tracking (contractor versus internal contingency), exposures or risk register (possible costs and likelihood), projections (future fee position), and overall budget health. Weekly review minimum with monthly deep dives into fee position including all five revenue streams.

How do you learn financial reporting without accounting background?

Sit with PM or project accountant and say “speak to me as you would a small child”, ask them to walk through every line of job cost reports and financial forms until you understand every section. Ask questions until everything makes sense. Then review weekly to build fluency with the numbers.